CCDC Chairman Shui Ruqing Addressed “2016 Bond Market Investment Strategy Forum”

Good morning ladies and gentlemen!

On behalf of the CCDC, I would like to extend a warm welcome to the leaders and guests that are gathering here again at the very beginning of the year in the Bond Market Investment Strategy Forum. During the past year, under the guidance of the governing authorities, focusing on its mandate as a core part of financial infrastructure, CCDC has made considerable progress on a series of fronts including implementing the national development strategy, promoting the market innovation and deepening its service system, which I would like to share with you today.

1. Giving full play to the role of core financial infrastructure

The year 2015 is a key year for deepening reform in China, and also a fruitful year for the bond market marking some important milestones. During this year, CCDC as a core part of the market infrastructure, has played a fundamental, supportive role mainly in the following areas:

1) Actively supporting growth and structural adjustments.

In 2015, the company has supported bond issuance at a record-breaking pace, with the annual issuance over 10 trillion yuan, registering a yoy increase of 70%; the bonds deposited under CCDC amounted to 35 trillion yuan, accounting for nearly 80% of the whole market; the net issuance (aka capital formation) came at 6.2 trillion yuan, an 1.2 times increase compared with the previous year. CCDC has effectively serviced the multi-layer and diversified financing needs in the market, and successfully supported the steady growth of the real economy. To this end, the company has taken measures in several areas in order to improve the service quality, including by improving the tender service system and promoting the centralized book-building filing system; setting up the Shanghai branch to effectively expand the service radius; and, in line with the deployments and requirements of enterprise bond issuance reform, initiating the technical assessment and credit system construction of enterprise bonds. By supporting the work of China Credit Assets Registration & Exchange Co., Ltd., CCDC has been facilitating the registration and exchange of credit assets amounted over 500 billion yuan, effectively revitalizing the credit asset stock, utilizing credit supply capacity, promoting the bank transformation and better servicing the real economy.

2) Supporting the implementation of national macro control policies.

On the fiscal front, the company has been providing supportive and safeguarding service to the whole life of treasury bonds and local government bonds. The total annual issuance of the treasury bonds stands at 1.8 trillion yuan. CCDC has been facilitating the implementation of Self-issue-self-pay policy of local government bonds, and deepening its study on issues of the local government bond market development. The issuance of local government bonds supported by CCDC stands at 3.84 trillion yuan, effectively reducing the local governments’ debt costs. In addition, CCDC supports the central and local treasury cash management of nearly 2 trillion yuan. On the monetary front, CCDC has supported PBC’s OMO of 4 trillion yuan in 2015. The company has been actively cooperated with PBC on the conducting of unconventional monetary tools including SLF and SLO, providing business and technical supports.

3) Working in coordination with the requirements of liberalization of interest rate, the internationalization of RMB and other financial reform and opening up strategies.

The inception of ChinaBond Pricing Center in 2015 aims to enhance market transparency and promote interest rate benchmark construction. CCDC has closely cooperated with the Ministry of Finance on the rolling issuance of short-term treasury bonds, which timely completed the short-term bond yields curve. According to the IMF assessment reports, CCDC’s three-month bond yield curve has been included by the IMF into the SDR interest rate basket, which had provided a technical valuation base for the RMB to join SDR. The work was rated by the Financial News among the annual top ten news of China's securities market, marking a breakthrough of China’s progress in benchmark interest rate construction and the market recognition, which will definitely speed up the overall process of interest rate liberalization and gain the initiative on the RMB asset interest rate pricing power both in domestic and foreign markets. The company also actively participates in the research of the changing monetary policy patterns and the interest rate transmission mechanism along yield curve. ChinaBond Pricing Center is keeping expanding its valuation business from conventional bonds to the non-standard assets.

In 2015, the company actively supported the opening up of China bond market and the internationalization of the RMB in an orderly manner. To improve the level of opening up of the market, CCDC has been seeking opportunities to further expand the foreign investor base, with totally 305 foreign institutions so far in the market holding more than 600 billion yuan of bonds. In order to facilitate the foreign central banks’ entry into the bond market, CCDC keeps deepening its service including introducing DVP settlements for foreign central banks. The ChinaBond price indices are referred to by more than 30 central banks and sovereign wealth management agencies. CCDC has also actively participated in the construction of Cross-border Interbank Payment System (CIPS) of RMB. International cooperation has been a vital part of CCDC’s efforts in last year, including the implementation of the Joint Statement of China-Germany Financial Dialogue, the continuous communication and information cooperation with China Europe International Exchange and other institutions, implement of the China-ROK Financial Cooperation Statement and a joint research with South Korean central custody agency on "Zhaishitong", which has born initial products, and the discussion with Euroclear, Russia NSD, HKEx and other institutions on cross-border cooperation methods.

4) Supporting financial inclusive strategy.

In 2015, in accordance with the PBC regulations on market access, CCDC has provided account opening services for qualified small and micro enterprises and rural financial institutions to participate the inter-bank bond market, and facilitated the investment and financing activities of these institutions. In accordance with the working agenda of the Ministry of Finance, CCDC launched the new generation savings treasury bonds system, which supports the round-the-clock OTC trading of commercial banks, and will effectively pushes forward the development of bond retail market. CCDC has sped up the construction of the ChinaBond Jinlian System, which is servicing dozens of small and medium-sized financial institutions by providing fund management system to improve their fund raising and investment efficiency. Under the guidance of the CBRC, CCDC has deepened its work in the wealth management product registration and trust product registration, and ensure the legitimate rights and interests of investors by strengthening the registration of the whole process and all elements of the products, while broadening the investment channels for individuals.

5) Enhancing liquidity management and risk management in the market.

In 2015, the company continued to provide efficient and secure infrastructure services for the market. The total amount of bond settlement amounted to 466 trillion yuan, up 90% year on year, accounting for 85% of the interbank market volume. The work on pledged bond management made some significant breakthroughs, further reflecting its pivot role in risk management, with the total amount of pledged bonds under the management of CCDC reaching 4 trillion yuan and the fields of application further enlarged, now including the central and local treasury cash management, foreign exchange reserve management, social security fund management, and futures markets, etc. The efforts of CCDC has effectively improve the market efficiency and contained the market risk. In 2015, there have been more than 10,000 members in the inter-bank bond market, a yoy increase of 50%. At the request of the market members, the company carried out training on the risk management of the bond market in an active manner. CCDC’s “Bond” magazine keeps improving its coverage and in-depthness, and was honored as one of “the Most Beautiful Magazine in China”. In addition, CCDC as a front-line market monitoring body works closely with the governing authorities to carry out market liquidity analysis and leverage analysis, and provides data support and policy recommendations as required to maintain market health and stability.

2. Continuing supporting the development outlook of the bond market

The Fifth Plenary Session of the 18th CPC Central Committee put forward the new development concept of “Innovation, Harmonization, Green, Openness and Sharing”. With this year being the first year of “13th Plan of Five-year National Development”, and standing at the historical horizon, we cannot emphasize more on the importance of a big and sound China bond market to achieve the goals of structural reform, rebalancing and growth. As a core national infrastructure, CCDC has its special mandates. We will strive to implement the new development concept by providing new services in a deeper and broader manner, and by fostering new development of bond market both in quantity and in quality.

1) Creating a joint force to support the coordinated development of the bond market.

The 13th Five-year Plan suggests “the establishment of safe and efficient financial infrastructures”. Indeed, it is an international standard and a general trend to integrate functions of infrastructures in dealing with a number of important relationships such as onshore and offshore, on-site and off-site, safety and efficiency, and front, middle and back office operations. We expect to, under the guidance of the governing authorities, and in accordance with the principles of “scientific planning, taking note reality, orderly division of task and seeking cooperation”, push forward the integration of the central depository institutions to promote market unification and improve market efficiency and international competitiveness.

2) Stimulating the vitality of the bond market to support innovative development.

In line with the objective requirements of bond market development under the “New Normal” and transformation backdrop, CCDC will actively promote the three-party repurchase business and the central lending facility, and improve market efficiency and soundness. The company will further enhance the ChinaBond Pricing Index system services, and let it play its multiple roles as market indicators, underlying assets, performance evaluation tools and risk control tools. The company will upgrade its pledge management service system that can provide the market with multi-functional, cross-market, internationalized pledge management services, serving as a market stabilizer and a liquidity hub. The company will also actively support the development of green bonds, continue to focus on carbon finance and Internet financial development, and provide effective targeted support services.

3) Unleashing the potential to support the opening up of the bond market.

Being a central depository body which is at the center of the bond market, CCDC keeps adapting to the opening up strategy of the bond market, and under the guidance of the governing authorities, CCDC will further escalate its cooperation with foreign depository agencies to promote interconnection of infrastructures. The company will actively build cross-border issuance platform, “Zhaishitong” settlement platform and RMB bond pledge management platform, thus setting up a framework for further internationalization of the RMB.

Dear guests and friends! The establishment of a unified, safe, efficient and open China bond market has a long way to go. I sincerely hope that everyone enjoy the frank and free discussions, making diagnose and suggestions for the market. Let us work together, under the correct leadership of the governing authorities, to push the bond market development to a new stage!

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